One Chart: Why Apple, Microsoft, Oracle, etc. are Teaming-Up Against Google

Here's last year's prediction, made back when Android had under 25% of the market and was smaller than the iPhone. Below are the latest comScore market share figures, which have Google's Android up 5.4% in three months and rapidly closing in on 50% of the U.S. smartphone market.

Top Smartphone Platforms 3 Month Avg. Ending Jul. 2011 vs. 3 Month Avg. Ending Apr. 2011 Total U.S. Smartphone Subscribers Ages 13+ Source: comScore MobiLens
	Share (%) of Smartphone Subscribers
	Apr-11	Jul-11	Point Change
Total Smartphone Subscribers	100.0%	100.0%	N/A
Google	36.4%	41.8%	5.4
Apple	26.0%	27.0%	1.0
RIM	25.7%	21.7%	-4.0
Microsoft	6.7%	5.7%	-1.0
Symbian	2.3%	1.9%	-0.4

Look no further than above for an explanation of the strange bedfellows which recently united against Google.

Book Review: 'Sustainable Wealth' By Axel Merk

Axel Merk’s Sustainable Wealth is very readable personal finance guide to today’s increasingly complex investment world. The book contains a wealth of practical information, and it can be particularly useful for novice investors who are interested in learning more about the role of macro forces and currencies, and how they influence markets.

About the Author

Axel was born in Munich, Germany and grew up in a family of investors. It was during college that he first began investing on behalf of clients. His academic training is in finance and computer science, and he has lived in many parts of Europe before relocating to the U.S. He is the founder and CIO of Merk Investments, a Palo Alto, California based mutual fund focused on currencies. In his personal life he is a distance runner and pilot, and he is married with children. Axel Merk also gives regular media interviews and periodically writes for SeekingAlpha.

Sustainable Wealth

With his book, written following the financial crisis in 2008, Merk aimed to reach an audience that is intelligent and interested but not necessarily educated in economics or currencies. While Merk runs a currency mutual fund, the book is not aimed at currency traders. Rather the book primarily targets the man in the street who is concerned with the actions of today’s policymakers. In the book Merk describes the pressures between where the market would like to go and the interference run by policymakers. Understanding this pull-push dynamic is at the heart of Sustainable Wealth.

One of the key themes of the book is the idea that “there is no such thing as a safe asset” and that investors may want to take a diversified approach to something as “mundane as cash”. The book contains a number of helpful, easy to understand explanations about the fundamental nature of the world’s current debt problem, and ways to address it on a personal level.

During an interview, Merk emphasized his independent opinion. That certainly can bee seen with his often seemingly minority view on the euro versus the U.S. dollar over the past 12+ months. Other than the temporary slide in the euro last summer to $1.18, Merk’s view on the euro has more or less proven correct. However, it is worth keeping in mind that Merk runs a currency mutual fund inside the United States, and that one of the ways in which more American investors would take an interest in his fund is if they are concerned about the fate of the U.S. dollar.

Continue reading the full review at SeekingAlpha here.

Book Review: The Bed Of Procrustes By Nassim Nicholas Taleb

'Most people write so they can remember things, I write to forget' - The Bed of Procrustes: Philosophical and Practical Aphorisms

Nassim Taleb's latest book is a collection of miscellaneous memorable thoughts (aphorisms), many of which relate to Taleb's disagreement and frustration with the academic economics practiced and publicly promoted by many Nobel prize winning economists.

There are two aspects of the title which warrant further discussion.

First, the term 'aphorism' comes from the classical Greek writings of Hippocrates. Given the various ills in economics which Taleb would like to see fixed, the appeal of referencing the father of medicine is quite clear.

The second aspect of the title, the 'Procrustean Bed', is also borrowed from classical Greece. The mythological figure of Procrustes would cut or stretch people to make them fit into his iron bed. Taleb's view is that many leading economists basically do the economic equivalent by framing the world in a way so that it fits into their quantitative models, rather than the other way around.

Continue reading the full review at SeekingAlpha here.

Keynes on Printing Money, and Do Loss-Suffering Central Banks (i.e., ECB, SNB) Need Capital?

Weimar Germany during the early-1920s hyperinflation

A 1924 quote from John Maynard Keynes reflecting on events in Weimar Germany and Lenin's Russia:

"A government can live for a long time, even the German Government or the Russian Government, by printing paper money." 

However, "In the last phase, when the use of the legal tender money has been discarded for all purposes except trifling out-of-pocket expenditure, inflationary taxation has at last defeated itself."

The above quote was excerpted from a 1997 paper by the IMF's Peter Stella titled 'Do Central Banks Need Capital?'

Can Central Banks Go Bust?

Technically speaking, the answer according to Stella is no, central banks do not require a capital buffer to absorb losses in the same sense that a commercial bank does. However, Stella states:

"Weak central bank balance sheets invariably lead to chronic losses, the abandonment of price stability as a primary policy goal, a decline in central bank operational independence, and the imposition of inefficient restrictions on the financial system to suppress inflation. 

...if society values an operationally independent central bank capable of attaining price stability without resorting to financial repression, the transfer of real resources to recapitalize the central bank becomes necessary when chronic losses are sizeable."

In other words, the overarching reason for central banks to hold sufficient capital is that it helps maintain confidence in the soundness of the central bank and the value of the currency it issues.

Has the ECB Become Europe's 'Bad' Bank?

As the European debt crisis has spread and intensified, central banks in Europe have been suffering heavy losses for over a year now.

The Swiss National Bank has reported losses in the tens of billions of swiss francs on its euro purchases over the past 12+ months. Whether or not the Swiss government will move to recapitalize the bank is unclear. So far as I know the Swiss central bank is unique among major world central banks in that it is publicly-traded with both government and private shareholders.

There has also recently been speculation that the relatively thinly-capitalized European Central Bank will need to be recapitalized again if it were to continue to suffer heavy losses on its purchase of European sovereign debt. The ECB recently began purchasing tens of billions in Italian and Spanish debt, which comes on top of the tens of billions in Greek, Irish and Portuguese debt it already holds. The prospect of the ECB needing additional funding is not sitting well with Germany and other rich European nations which will have to foot the bulk of the bill.

Interesting times in the world of central banking.

Video: Author Sylvia Nasar's 4-Minute Illustrated History of Economics

I'm a huge fan of Nasar's book A Beautiful Mind and am very much looking forward to her latest work, Grand Pursuit: The Story of Economic Genius.

Below is a video of a presentation on A Beautiful Mind Nasar gave at MIT on October 28, 2002, where at the end she makes a reference to her upcoming history of economic thought.

The Great Hope - An Update on the Holy Grail of Clean, Limitless Energy

Good story from the Guardian on the state of fusion research here.

While economically viable fusion may be decades off at the current low relative level of investment, it's good to see the world's great geopolitical powers working together:

Last year, bulldozers began clearing land 60km north-east of Marseille in southern France. By 2019, it is hoped that the world's largest and most advanced experimental tokamak will be switched on. The €15bn International Thermonuclear Experimental Reactor (ITER) is being funded by an unprecedented international coalition, including the EU, the US, China, India, South Korea and Russia.

h/t Tyler Cowen

End of A Tech Era - Steve Jobs Resigns as Apple CEO (Video)

Details here.

Sadly, this is likely grim news as I imagine the only reason Jobs would resign is for health reasons.

The multi-episode documentary Triumph of the Nerds is one of the first films to chronicle the early rise of Mr. Jobs and Silicon Valley, as well as Jobs' legendary rivalry with Bill Gates. It features rare, candid interview footage with Jobs.

Embedded below is the Jobs-Apple focussed episode 3, and if you want to skip ahead to when Jobs comes on go to the 9:45 mark.

P.S. The earlier Triumph of the Nerds episodes 1 and 2 are also on Google Video.

Video: Banks Should Be Public Utilities

Software Is Eating The World

The tech world was roiled this week by Google's acquisition of Motorolla and HP's corporate makeover. Here's a good read from Marc Andressen (HP board member, VC and Netscape co-founder) on the current state of tech and where things are headed.

Quote of the Day: Paging Mr. Oliver Cromwell

Oliver Cromwell

Putting aside his controversies for a moment, the below words Oliver Cromwell used during his address to the Long Parliament in 1653 feel appropriate for today:

"It is high time for me to put an end to your sitting in this place, which you have dishonoured by your contempt of all virtue, and defiled by your practice of every vice. Ye are a factious crew, and enemies to all good government; ye are a pack of mercenary wretches, and would like Esau sell your country for a mess of pottage, and like Judas betray your God for a few pieces of money. Is there a single virtue now remaining among you? Is there one vice you do not possess? Ye have no more religion than my horse; gold is your God. Which of you have not bartered your conscience for bribes? Is there a man among you that has the least care for the good of the Commonwealth? 

Ye sordid prostitutes, have you not defiled this sacred place and turned the Lords temple into a den of thieves by your immoral principles and wicked practices. Ye are grown intolerably odious to the whole nation. You who were deputed by the people to get grievances redressed, are yourselves become the greatest grievance. Your country therefore calls upon me to cleanse this Augean stable, by putting a final period to your iniquitous proceedings in this House; and which by God`s help, and the strength he has given me, I am now come to do. 

I command ye therefore, upon the peril of your lives, to depart immediately out of this place; go, get you out! Make haste! Ye venal slaves, be gone! So! Take away that shining bauble there, and lock up the doors. In the name of God, go!"

Are there any politicians out there today who can deliver similar words with conviction and credibility?

The SEC: Just When You Think You've Run Out of Outrage...

SEC Commissioner Mary Schapiro

Things were starting to look up for the beleaguered-since-Madoff  U.S. Securities and Exchange Commission (SEC) with its spate of successful prosecutions of high-profile insider trading criminals. But for the U.S. stock market cop it continues to be a case of one step forward, four steps back.

Rolling Stone's Matt Taibbi delivers the latest bombshell:

For the past two decades, according to a whistle-blower at the SEC who recently came forward to Congress, the agency has been systematically destroying records of its preliminary investigations once they are closed. By whitewashing the files of some of the nation’s worst financial criminals, the SEC has kept an entire generation of federal investigators in the dark about past inquiries into insider trading, fraud and market manipulation against companies like Goldman Sachs, Deutsche Bank and AIG. With a few strokes of the keyboard, the evidence gathered during thousands of investigations – “18,000 … including Madoff,” as one high-ranking SEC official put it during a panicked meeting about the destruction – has apparently disappeared forever into the wormhole of history. 

It goes without saying that no ordinary law-enforcement agency would willingly destroy its own evidence. In fact, when it comes to garden-variety crooks, more and more police agencies are catching criminals with the aid of large and well-maintained databases.

Much has been made in recent months of the government's glaring failure to police Wall Street; to date, federal and state prosecutors have yet to put a single senior Wall Street executive behind bars for any of the many well-documented crimes related to the financial crisis. Indeed, Flynn's accusations dovetail with a recent series of damaging critiques of the SEC made by reporters, watchdog groups and members of Congress, all of which seem to indicate that top federal regulators spend more time lunching, schmoozing and job-interviewing with Wall Street crooks than they do catching them. As one former SEC staffer describes it, the agency is now filled with so many Wall Street hotshots from oft-investigated banks that it has been "infected with the Goldman mindset from within."

Anyone seen the latest Intrade odds on SEC head Mary Schapiro keeping her job?

Full Taibbi article here. 

A Reason for the Americas to Be Optimistic

In the words of the author, "adios, OPEC".

The Americas, Not the Middle East, Will Be the World Capital of Energy

Michael Lewis on Germany & the Eurozone

The latest and final instalment in a series of what author Michael Lewis has described as 'Euopean financial disaster tourism' articles he's penning for Vanity Fair can be found here. This latest article focuses on Germany (the previous two covered Greece and Ireland - google them or click on 'Michael Lewis' tag below to get the link).

The Germany articles also features an accompanying interview with Lewis, where 'Europe's least welcome tourist' discusses the problems with the broader Eurozone:

VF Daily: Where did the euro go wrong? 

Lewis: At its conception. They glued together a bunch of countries and cultures that didn’t really belong together in the same currency. So if you put Germany together with Greece in a single currency, it’s a little like watching an Olympic sprinter and a fat old man running a three-legged race. The Greeks will never be as productive as the Germans, and the Germans will never be as unproductive as the Greeks. So if they’re in the same currency—unless the Greeks simply up and move to Germany to work for the Germans—it implies a lifetime of transfers from Germany to Greece. 

VF Daily: Greece was allowed a partial default this week, to the tune of $157 billion, despite the E.C.B.’s disapproval. This measure seems like a Band-Aid, though. Can we expect something much larger to happen, or do presidents and prime ministers just enjoy getting together to argue every six months? 

Lewis: The Germans are basically calling the shots here, because they’re the only ones who can afford to pay the bill. My impression is that the German people do not want to pay it, but the German leadership does not want to be labeled as the people who destroyed the euro. So the way Angela Merkel is playing it is to tell the German people what they want to hear until the moment another crisis occurs, and then she goes into parliament and says, “I need this little check to get us through this rough patch, or you will be responsible for the disintegration of Europe.” What she doesn’t ever come away with, however, is a commitment for fiscal union. She doesn’t get Germany agreeing to underwrite euro bonds—to take all the debt of the southern countries. 

VF Daily: Well, it would be political suicide, right? 

Lewis: She may have already committed political suicide. German people are increasingly unhappy with how she has handled the crisis. I don’t think that the German people are going to go all-in. The step that they would need to take is much more dramatic than this Band-Aid.

Video: Our Political and Economic Problems Are Fundamentally a Crisis in Virtue

Marcus Aurelius

George Friedman of STRATFOR gets to the heart of the current political and economic malaise in a brief and succinct video interview here.

He's spot on about the point that all the new regulation in the form of Dodd-Frank, Basel III, etc. do zero good without enforcement.

And why aren't both existing and new regulations being enforced? In Dr. Friedman's view, it comes down to a lack of virtue among our current elite.

The good news is that this is not an insolvable problem for two reasons: First, virtue, in my opinion, is unlike height, raw intelligence, or good looks, in the sense that it is not something that one is by-and-large born with. Virtue is both learned and cultivated over time.

But how much attention do we currently place on the development of virtue? The classics in the western world on this topic include the works by Marcus Aurelius, Benjamin Franklin, Adam Smith, Thomas Aquinas, Aristotle, among others. To perhaps unfairly single out two disciplines, what room is made for those works in our current economics and business curriculum? From my personal observations, zip.

The idea of a renaissance education has been steadily pushed aside through the years in favor of the poly-technical practicalness of the 1-minute manager MBA and quant-PhDs. Today's economic and political conundrum is arguably a by-product of this de-prioritization of the study and development of virtue.

The second reason I am optimistic we can solve this problem is that when our leaders first fail society in such an epic fashion, and then next fail a second time by not fixing the root-cause of the problem, then those of us in representative democracies often make change.

Here's to hoping we get the change right this time.

Playing it Safe, Losing it All

Two facts worth highlighting from Drew Westen's controversial NY Times piece titled 'What Happened to Obama':

1. Obama published nothing (except his autobiography) during his twelve years as a faculty member at the University of Chicago
2. Before joining the Senate he voted 'present' (instead of 'yea' or 'nay') 130 times

What is one to make of this?

I won't speculate on Obama's not publishing anything in an academic journal, but one thing presidential candidates are often attacked on is their voting record. During a heated political campaign a candidate's previous legislative votes are scrutinized and picked over for any possible controversy (see John Kerry). As an astute observer of political history and campaigns, Barrack Obama would be well aware of this.

Was his voting 'present' strategy all about playing it safe and as Westen puts it "dodging difficult issues"? Or is there another explanation all together?

From Westen:

Perhaps those of us who were so enthralled with the magnificent story he told in “Dreams From My Father” appended a chapter at the end that wasn’t there — the chapter in which he resolves his identity and comes to know who he is and what he believes in.

One of the hallmark qualities of Barrack Hussein Obama's rise to the presidency has been his exceptional risk aversion. That strategy worked well in the campaign but is not serving President Obama or the country well at a time when bold, visionary political leadership is needed.

Like many, I've been scratching my head trying to put my finger on what it is about Obama that just doesn't seem right. And then I remembered a comment made by fashion designer Karl Lagerfeld when he was asked to describe himself: "I don't want to be real in other people's minds. I want to be an apparition."

I completely agree with Westen that right now the U.S. desperately needs the gregarious optimism and energy of a Franklin Delano Roosevelt or Teddy Roosevelt type personality in the White House, and not the Lagerfeld-esque 'complete improvisation' we seem to have at present.

I will never wholly forgive and forget the missed opportunity in 2009 to conduct a perhaps once-in-a-century overhaul of the global financial system, along with Obama's decision to reappoint many of the same people who led us into the crisis - Larry Summers, Tim Geithner, and Greenspan protege Ben Bernanke.

With the way things are going at Bank of America and the Eurozone we may soon get a second bite at the financial system overhaul apple. Fighting to keep Timothy Geithner on as Secretary of the Treasury doesn't exactly instil in one a sense of optimism, but there is still time for President Obama to do what is necessary to restore American optimism.

The Xinjiang 13 and Chinese Appeasement

A disturbing report from Bloomberg about several elite U.S. universities not standing up to Chinese suppression of academic research freedom and free speech:

They call themselves the “Xinjiang 13.” They have been denied permission to enter China, prohibited from flying on a Chinese airline and pressured to adopt China- friendly views. To return to China, two wrote statements disavowing support for the independence movement in Xinjiang province. 

They aren’t exiled Chinese dissidents. They are American scholars from universities, such as Georgetown and Massachusetts Institute of Technology, who have suffered a backlash from China unprecedented in academia since diplomatic relations resumed in 1979. Their offense was co-writing “Xinjiang: China’s Muslim Borderland,” a 484-page paperback published in 2004. 

“I wound up doing the stupidest thing, bringing all of the experts in the field into one room and having the Chinese take us all out,” said Justin Rudelson, a college friend of U.S. Treasury Secretary Timothy Geithner and former senior lecturer at Dartmouth College, who helped enlist contributors to the book and co-wrote one chapter.
The sanctions, which the scholars say were imposed by China’s security services, have hampered careers, personal relationships and American understanding of a large, mineral- rich province where China has suppressed separatist stirrings. Riots and attacks in Xinjiang in July left about 40 people dead.

In the race to embrace China's riches the leaders of elite U.S. academic institutions (who should know better) seem to have forgotten that China is run by a brutal, freedom-suppressing dictatorship. Yet Stanford, the University of Chicago, Duke and NYU have or are in the process of building branch campuses in mainland China. Have many of the U.S.'s best universities forgotten that history has not looked kindly on those who have cozied-up to regimes like China's current one?

The Xinjiang 13 incident also smacks of the same problem in academia which Oscar Winning Director Charles Ferguson documented in his must-watch film Inside Job. Has the academy not learned anything about the importance of professional ethics these past few years?

Full article on the Xinjiang 13 here.

Video: The Commanding Heights - the battle between government and the marketplace

No less relevant today than it was roughly ten years ago when it first premiered, below is Part 1 of the must watch video series The Commanding Heights. Globalization, Keynes vs. Hayek, the future capitalism -- it's all here. Especially recommended for those interested in intellectual history. You'll find the remainder of the episodes at PBS here.

Barry Eichengreen on What Could Replace the U.S. Dollar

Professor Eichengreen explains the current state of the world's reserve currencies and makes the argument for GDP-indexed bonds here.

Video: Raise the Debt Ceiling Rap

A little late to spot this one, but it's well done and will be relevant again in a few months time when the debt ceiling vote comes up again.

Germany Pushing Greece to Exit the Euro

From the front page of today's International Herald Tribune are rumblings from some of Germany's leading economic intellectuals that the time has come for Greece to exit the euro.

Gold Price: Full Steam Ahead to $2,000/oz.

Over a year ago, on May 6, 2010, this blog launched with a first post on the attractiveness of gold as an investment. On that day the price of gold was just under $1200/oz, and as it became clear that the Federal Reserve was about to embark on another large round of money printing, which later came to be known as QE2, I felt compelled to grab the keyboard and start typing (see articles tagged 'Gold' both here and on SeekingAlpha for further reference).

During this time it has been amusing to watch the professional punditry drone on about a  "gold bubble" and observe various blogger bets about how gold's run couldn't last. The biggest amusement of all, however, has been the disparaging remarks from those such as Berkshire Hathaway's Charlie Munger, who belongs to a group I've taken to calling the 'gold haters'.

Suggestions from credible policymakers, such as the World Bank's Robert Zoellick advocating a return to the gold standard, have lit a fire under the barbarous relic's price this past year. Today, with gold pressing above $1700, or nearly 50% higher in just over a year, I can't help but comment on how we've heard nary a peep of late from the anti-gold crowd.

Where to from here? As long as three key fundamental forces persist then the rise in the price of gold will continue unabated. Those forces are:

1. Low interest rates, a hallmark of the current program of financial repression, which is only just getting started and should extend for many years to come.
2. Continued central bank purchases of gold by countries such as South Korea, Thailand, Russia, etc.
3. More money printing, which we've seen in spades of late with Italian and Spanish bond buying, Bank of Japan and Swiss National Bank currency intervention, and the Fed's rumored QE3.

Continue reading the full article at SeekingAlpha here.

Podcast: Keynes vs. Hayek Debate at LSE

Here's the podcast.

Framing Keynes vs. Hayek is a bit simplistic and perhaps even somewhat counter productive. Of Keynes, Hayek wrote posthumously "he was the one really great men I ever knew, and for whom I had unbounded admiration". Keynes was no socialist, and there is much these two great thinkers agreed upon.

For more on this and the type of thinker it would be more appropriate to contrast with Hayek see here and here.

Video: Margin Call Movie Trailer

The Root of All Sovereign-Debt Crises (and How to Prevent Them)

A good read and interesting suggestion from Professor Amar Bhidé and Nobel Prize Winner Edmund S. Phelps on how to put a permanent end to sovereign debt crises.